https://www.casebriefs.com/blog/law/securities-regulation/se...
>Held. (Rehnquist, J.) No. We embrace the holding of the Second Circuit in the 1952 Birnbaum case, 193 F2.d 461 (2d Cir. 1952). That rule demands that a plaintiff must be either a seller or a buyer to seek a remedy under 10b-5 and we reinforce this rule both through contemplation of legislative history and by policy deliberations. The SEC had attempted to get Congress to amend 10b-5 to contain “any attempt to purchase or sell a security”, but Congress had declined to do this. Congress desired to restrict 10b-5 to cases of “actual damage”, and without Birnbaum, evidence of damage would be too theoretical. Regarding policy considerations,the Birnbaum rulemay incite the offerees, knowing that they would not be subject to summary judgment would sue to push the corporate defendant to settle out of court,would lead to “strike suits”. The evidence presented by an offeree at trial would be too subjective, seeing as no objective criteria could assistin measuring plaintiff’s dependence on the prospectus. In conclusion, Manor Drugs has no contractual right to a Birnbaum rule. Manor Drugs was a member of a limited class, but permitting them to utilize the rule would lead to a breakdown of the Birnbaum rule. Reversed.
And of course you can see Congress adding loopholes they can themselves use.
The no insider trading rules are a joke.
1). Set up a 10b5-1 plan selling all your shares each day.
2). Set up a 10b5-1 plan that buys as many shares as possible.
3). Get insider information on the company.
a). If good for company cancel plan from step 1.
b). If bad for company cancel plan from step 2.
c). If neither cancel both plans.
Sorry to say but you're looking for a way to defend an indefensible system.
If you want to see it in action look at what the Intel CEO did.
You're also choosing not to cancel a trade, which is the difference from the example you've cited. Choosing not to cancel a trade based on material, non-public information after establishing a pattern of regularly canceling your planned trades doesn't seem to be something that's been tested (at least in anything discussed here so far).
And note that I'm not saying no one pushes - or crosses - lines; nor am I saying that the system isn't exploitable near the margins. I am saying that if you were as flagrant in abusing it as you posted above, I wouldn't bet on your safety from the SEC.
> Sorry to say but you're looking for a way to defend an indefensible system.
No, I'm contesting a claim that seems inaccurate. I quite readily agree there are things that need fixing.
> If you want to see it in action look at what the Intel CEO did.
I don't think we have enough details about what the Intel CEO did to say much - more shares were sold, but it was plausible the formula was set in advance of discovery of the flaw and more shares were sold simply because the stock had gone up. If you have a source with more details, please share it.
It's a useless and snarky dismissal if I had been saying their interpretation was wrong...
But my entire point has been that we haven't observed their interpretation of the law as applied to the extreme circumstance you described.
At this point, I'm sufficiently skeptical that you're engaging in good faith that I probably won't be responding further.
>After Rule 10b5-1 was enacted, the SEC staff publicly took the position that canceling a planned trade made under the safe harbor does not constitute insider trading, even if the person was aware of the inside information when canceling the trade. The SEC stated that, despite the fact that 10b5-1(c) requires trades to be irrevocable, there can be no liability for insider trading under Rule 10b-5 without an actual securities transaction, based on the U.S. Supreme Court's holding in Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (1975).[0]
Without knowing the 10b5-1 schedule you can't say if insider knowledge was used when executing the plan. The simplest and dumbest version of this would be unique individual sale plans for each share you own for every day of the year. You just cancel the ones you don't want to sell, until you do, and everything is legal.
[0] https://en.wikipedia.org/wiki/SEC_Rule_10b5-1#A_possible_loo...